North Korea realty market soars

Practice of buying, selling becoming more widespread and sophisticated

SEOUL – One of the world’s fastest developing property markets is also in one of its least likely places — North Korea.

Even though the buying and selling of houses and apartments is illegal, it is becoming more widespread and sophisticated, said defectors as well as experts who study the ruined economy.

On paper, the socialist state owns all property. But the percentage of North Koreans who are buying their own home — as opposed to waiting for the government to assign one — is growing rapidly, surveys of defectors show.

Brokers with lists of property for sale can be found in private markets selling food and cheap consumer goods that are tolerated by the government in cities and towns around North Korea, the defectors and experts said.

“You can find a house you want by asking brokers,” said Kim Young Il, a defector and activist in Seoul.

Deals are done in U.S. dollars in the capital, Pyongyang, and in Chinese yuan along the border with China, where most of the North’s trade with the outside world takes place. The buyers and sellers then bribe housing officials to effectively approve the transaction by issuing or modifying residency documents, the defectors and experts said.

It is another example of how the regime of leader Kim Jong Un is turning a blind eye to a black market that is offering North Koreans a chance to upgrade their living conditions, move from one location to another or to simply make some money, especially given that house prices have been rising steadily.

It is common for defectors to send money to the North so their families can buy better homes. Activist Kim and two other defectors say they have also heard of some people buying property as an investment ahead of what they hope will be the eventual reunification of their impoverished homeland and the wealthy South. Those accounts could not be confirmed.

Defectors send an estimated $10 million each year to help their families in the North, according to the Organization for One Korea, a South Korean support group for defectors. The money is routed through agents on China’s side of the land border.

“If you have money, send it to somebody you trust. You can buy a decent house in the border region with China,” said Kim, the defector, who runs a nongovernmental organization called People for Successful Corean Reunification, which uses the ancient spelling of Korea.

Kim said he had a friend who needed to raise money last winter to fund his escape to the South, so the friend sold his apartment in the North Korean border city of Hyesan for 40,000 Chinese yuan ($6,600). He declined to identify his friend, who he said was at a resettlement center south of Seoul that helps defectors try to get to grips with life in South Korea.

Under the socialist system erected by Kim Il Sung, the young leader’s grandfather, the government built and allocated housing to its citizens. Then famine killed an estimated 1 million people in the mid-1990s, causing the collapse of the state food distribution system. That opened the door to private markets selling food in the late 1990s.

Trading in property soon followed, especially since the cash-starved state spent money on its 1.2-million-strong military instead of public housing.

Under North Korean law, anyone who sells, buys or rents a house can be sentenced to hard labor. But a survey last year of 133 defectors by the Seoul National University’s Institute for Peace and Unification Studies found 67 percent of them had bought their own homes, compared with 14 percent who had been given accommodation. The defectors left North Korea in 2012.

A similar survey of 126 defectors who left in 2011 showed 46 percent bought their own home.

“With market forces spreading, North Koreans are becoming able to dream of moving into a better house,” said Jeong Eun-mee, an SNU research professor involved in the survey. “Homes, one of the few resources North Koreans have, are now extensively traded unofficially. The regime has no option but to tolerate this . . . because officials are involved as well.”

In a 2013 report, the Korea Institute for National Unification, a South Korean state-run think tank, said housing officials are usually bribed with cigarettes or food to approve a property transaction in one of the world’s most corrupt countries. While it is impossible to independently confirm anything in the North, similar studies support the suggestion of growing property ownership.

There is no hard data, but apartment prices have risen in the past decade in Pyongyang and small cities on the Chinese border, defectors said.

Lee Yun Keol, a biologist who came to Seoul in 2005, said he had heard that an apartment he used to own in Pyongyang was worth $100,000, nearly 15 times what he paid more than a decade ago.

Properties close to statues of Kim Il Sung or his son, Kim Jong Il, in the center of Pyongyang command a higher price thanks to constant water and electricity supplies, defectors said.

They added that the property market revolves around the brokers, who keep a low profile in private markets but can be found by asking around. Once a buyer and seller agree on the price, they bribe housing authorities to alter names on mandatory residence permits that give an address. North Korea only allows one house to be registered against one name, so people use the names of relatives if they want to buy more.

Outside Pyongyang, where there is more scope for private commerce because state scrutiny is less intense, the property market has also created a new class of businessmen who employ workers outside the broken state system and raise funds to buy building materials, defectors and experts said.

The North Korean state has also been getting in on the property trade. Since taking office more than two years ago, Kim Jong Un has presided over a construction boom with the aid of funds from China and Russia.

The state-run KCNA news agency, for example, reported in January that the government had built apartments for 1,000 families of scientists in Pyongyang. For some newly built flats in Pyongyang, government firms sell the units, keeping the money as profit to stay viable, experts and defectors said.